Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Estate of Schneider v. Finmann, Court of Appeals of New York, June 17, 2010

Facts: The defendant attorney represented decedent Saul Schneider from April 2000 to his death in October 2006. In April 2000, the decedent purchased a $1 million life insurance policy. Over several years, he transferred ownership of that property from himself to an entity of which he was principal owner, then to another entity of which he was principal owner and then, in 2005, back to himself. At his death in October 2006, the proceeds of the insurance policy were included as part of his gross taxable estate.

The decedent's estate commenced this malpractice action in 2007, alleging that defendant negligently advised the decedent to transfer, or failed to advise the decedent not to transfer, the policy which resulted in an increased estate tax liability.

The New York Supreme Court granted defendant's motion to dismiss the complaint for failure to state a cause of action. The Appellate Division affirmed, holding that, in the absence of privity, an estate may not maintain an action for legal malpractice. The estate appealed.

Issue: Whether the estate can hold the decedent's estate planning attorney liable for damages resulting from negligent representation that causes enhanced estate tax liability?

Ruling: Yes.

Privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the estate planning attorney. We agree with the Texas Supreme Court that the estate essentially stands in the shoes of a decedent and, therefore, has the capacity to maintain the malpractice claim on the estate's behalf. The personal representative of an estate should not be prevented from raising a negligent estate planning claim against the attorney who caused harm to the estate. The attorney estate planner surely knows that minimizing the tax burden of the estate is one of the central tasks entrusted to the professional.

The Court did note, however, that strict privity remains a bar against beneficiaries' and other third-party individuals' estate planning malpractice claims absent fraud or other circumstances, since such claims would lead to "uncertainty and limitless liability".

Lesson: Privity is not a bar to an estate's legal malpractice lawsuit against the decedent's purportedly negligent attorney.

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 Hofstra Law School: Lawyer Malpractice Class #3

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Suggested Readings: Fortney & Johnson, Legal Malpractice Law. Ch. 2 pp. 15-33

Here's a rhetorical question: How many ways are there to sue a lawyer?

There used to be only one: Breach of Contract. But as time marched on, tort law expanded the duties that lawyers were found to have to not only clients with whom the lawyer was in a privity relationship but to third parties who did not fit the classic definition of a client. So, negligence became yet another cause of action. Then there came the concept of breach of fiduciary and, lo and behold a third cause of action was born. Add to those the relatively recent innovation of statutory causes of action, such as Consumer Fraud and Deceptive Trade Practices, the Federal Debt Collection Practices Act, federal securities laws, and other statutes, both state and federal. Add still more Rules that expanded the standards by which lawyers' conduct is governed and measured, such as the Rules of Professional Conduct.

The growth of lawyer liability law closely parallels the law of product liability. It started with breach of contract, grew into negligence, then strict product liability under §402A of the Restatement of Torts, a hybrid cause of action.Then there were state product liability laws that re-defined the common law.

So too legal malpractice. It has all the elements of contract and tort combined and now, we even have an entire Restatement dedicated to the Law Governing Lawyers. We also have court decisions and state statutes that expand and shrink those instances where lawyers are liable for their professional malpractice. 

Let's take them one at a time and try to decipher the elements of each.

1. Breach of Contract

a. Express Contract

It's unusual to see many lawyers sued by their clients on the basis of breach of an express contract. Usually, the contract sued upon is the engagement agreement between the lawyer and client. But unless the lawyer has promised to do something specific or has promised to achieve a certain result, a breach of contract does not usually lie. Here's an example of where a lawyer did promise to do something specific, did not and was sued for the damages incurred by the client:

 Gunn v. Mahoney, 95 Misc.2d 943, 408 NYS2d 896 (1978)

What's to be gained by suing for breach of contract?

1. Sometimes, there's a longer statute of limitations in contract actions than in tort actions.

2. A contract action may be less expensive to litigate because no expert witness is generally required to prove breach of an express term of the contract. For example, if an attorney promises to form a corporation for a client and fails to do so, that's a rather simple breach to prove. 

3. Contract damages, however, may be more restricted than tort damages. 

4. Some states may allow an award of interest on a judgment for contract damages. 

5. Here are the elements of the contract cause of action:

a) a valid contract that can be legally enforceable (i.e., offer and acceptance);

b) plaintiff has performed his/her obligations under the contract (i.e, consideration, usually by way of payment of the attorney's fee and/or cooperation with counsel, etc.);

c) the lawyer breaches an express promise made as part of the contract; and 

d) actual damages suffered by the client. 

Here's a good analysis of the the cause of action for breach of contract against a lawyer for his malpractice in failing to perform a specific task:

Gorski v. Smith, 2002 PA Super 334, 812 A.2d 683 (2002)

And here, a less than contemporary view from another state:

Olyear v. Kerr, 217 Va. 88, 225 SE2d  398 (1976) 

b. Implied Contract

Implied in every attorney client relationship is an attorney's promise that his professional services will comply with  applicable standards of care and the client's acceptance of that implied term as part of the professional relationship. Some consider the implied contract theory as a bridge into the tort claim for negligence. Some states allow plaintiffs to sue for  both the contract claim and the tort claim. Some states apply different statutes of limitations to these causes of action. Others hold that it is a duplicate cause of action and  will dismiss  either the contract or the tort cause of action where both claims are based on the same operative facts. Perhaps the breach of implied contract is more like the negligence claim because expert testimony will invariably be required to prove the applicable standard of care, how the attorney breached that standard of care and whether that breach was the proximate cause of any damages. 

Celentano v. Grudberg, 76 Conn App. 119, 818 A.2d 841 (2003)

Hall v. Nichols, 400 SE 2d 901 (W.Va.1990)

 
 2. Tort: Negligence

This cause of action is the most widely accepted and the one on which most legal malpractice claims are based. Essentially, the question we seek to address is "What did the lawyer do wrong?" There need not be any motive to do anything "wrong". It may have been just a mistake; even an innocent one.  The trick is how do you define what a "mistake" is?

Here are the elements of the negligence cause of action:

a) an attorney-client (or foreseeable non-client)  relationship that gives rise to a duty of care within the scope of the relationship;

b) the attorney's failure to exercise ordinary skill and knowledge thus departing from the standard of reasonable care;

c) that the departure was the proximate cause  of 

d) actual damages suffered by the client (or non-client). 

The essence of negligence is that the lawyer failed to comply with the applicable standard of care in the duties that he has to a client within the scope of the representation he furnishes to the client.  The deviation from the standard in discharging the lawyer's duty is negligence. Of course, whether that negligence caused any damage is quite another question. But for the time being, let's try to understand what the lawyer's standard of care is.

Assume that the lawyer has a duty to do something for the client. (What the specific duties are we will soon learn.)  But for now, here are a few examples of how the lawyer's standard of care is defined:

The Restatement of Law Governing Lawyers:

§ 52 The Standard of Care

(1)...a lawyer who owes a duty of care must exercise the competence and diligence normally exercised by lawyers in similar circumstances.

 New York Pattern Jury Instructions 2:152 Malpractice-Attorney:

An attorney who undertakes to represent a client impliedly represents that (he,she) possesses a reasonable degree of skill, that (he,she) is familiar with the rules regulating practice in actions of the type which (he,she) undertakes to bring or defend and with such principles of law in relation to such actions as are well settled in the practice of law, and that (he,she) will exercise reasonable care. Reasonable care means that degree of skill commonly used  by an ordinary member of the legal profession. [Emphasis added].

But what if the lawyer being sued is not just an "ordinary" member of the legal profession? What if he or she is extraordinary? What if he's a specialist in his field? What if he's rated as a "SuperLawyer" or "Best Lawyer".  That's no ordinary lawyer. What standard applies to such a star in his field?

  Here's one court's view on a case involving the specialized area of Workers Compensation law:

"...a lawyer holding himself or herself out as a specialist in an area of law must exercise the knowledge and skill ordinarily possessed by other specialists in the same area of the law." Celucci v. Bronstein, 277 N.J.Super. 506, 522 (App. Div. 1994). 

Here's what  one of the most popular treatises in the field has to say:

Whether an attorney is a "specialist" may determine not only the standard of care by which the attorney's conduct is to be judged, but also the manner in which liability is to be established. For example, an attorney whose skill and conduct are questioned may find that his or his conduct is to be judged by comparison to the skills of a renowned specialist in the same field...

The recognition of a speciality is simply an acknowledgment of the need for special skill and knowledge that is not part of the ordinary attorney's equipment. It is not unfair to require that an attorney, who practices in a specialty, to exercise the skills and posses the knowledge requied to competently represent a client.

Mallen & Smith, Legal Malpractice, 2008, ed. §20:4, p.1282.

And, especially in these days of aggressive advertising by lawyers, the claim of specialization is all the more important in holding lawyers accountable who claim that they are specialists. One California court held:

One who holds himself out as a legal specialist performs in similar circumstances to other specialists but not to general practitioners of the law. We thus conclude that a lwyer holding himself out to the public and to the profession as specializing in an area of the law must exercise the skill, prudence and diligence exercised by other specialists of ordinary skill and capacity specializing in the same field.  Wright v. Williams, 47 Cal App. 3d 802, 809-810, 121 Cal Rprtr. 194,199 (2d Dist. 1975).

3. Breach of Fiduciary Duty

There's a famous Norman Rockwell painting of 3  young boys building a dog house for their new pup. Above the door,  they've painted the pet's name: FIDO.  Why did they give  him that name? What does it mean?  To those boys, FIDO is the embodiment of their greatest and most trusted friend and companion who would always be there to guide and help them. Is there any wonder what the derivation of the name "FIDO" is? 

The Fiduciary Duty, as it applies to lawyers and the attorney-client relationship has been characterized as a "mega duty" with 4 inherent component-duties:

1. the duty to avoid conflicts of interest;

2. the duty to protect a client's confidential information;

3. the duty to communicate with the client;

4. the duty of competence. 

The fiduciary duty is unique because it expresses the very essence of the lawyer's creed: to put the client's interests ahead of the lawyer's. Even if it harms the lawyer in some way.  It embodies  the importance of loyalty to the client, of serving his interests faithfully, diligently and competently and in never permitting the interests of  one client to clash with the interests of others. The client is the "master"; the lawyer the "servant". Thus the oft stated wisdom that a servant cannot serve two masters at the same time. 

Here's the view of the Restatement of the Law Governing Lawyers:

§ 16 A Lawyer's Duties to a Client--In General

...[A] lawyer must, in matters within the scope of the representation:

(3) comply with obligations concerning the client's confidences and property, avoid impermissible conflicting interests, deal honestly with the client, and not employ advantages arising from the client-lawyer relationship in a manner adverse to the client;...

 § 49. Breach of Fiduciary Duty--Generally

...[A] lawyer is civilly liable to a client if the lawyer breaches a fiduciary duty to the client set forth in §16 (3)...

 

 Justice Cardozo's much quoted words on the nature of the fiduciary conveys the essence of the  duty.  A fiduciary,

"is held to somehting stricter than the morals of the market place. Not honest alone, but the punctilio of an honor the more sensitive, is then the standard of behavior."

 Meinhard v. Salmon, 249 NY 458 (1928).  

With such a high moral, ethical and legal standard applied to lawyers, it's no wonder that the proliferation of legal malpractice suits invoke the fiduciary duty more and more  as one of the theories of liability. Has it been over-used and stretched beyond its intended use? Professor Charles Wolfram has something interesting to say about that.

See,  "Wolfram, A Cautionary Tale: Fiduciary Breach as Legal Malpractice", 34 Hofstra L. Rev. 689 (2006).

Read: 

Fiorentino v. Rapoport, 693 A. 2d 208 (Pa.Super. 1997) 

Santulli v. Englert, Reilly & McHugh, P.C. 586 NE 2d 104 (NY, 1992) (legislatively overruled by NY CPLR 214 (6).

Estate of Re v. Kornstein, Veisz & Wexler, 958 F. Supp. 907 (SDNY 1997) (Sotomayor, J.)

Please share your thoughts and comments with us. Just click the "comment" button. 

Prof. W.

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Paragon Contractors, Inc. v. Peachtree Condominium Association et al., New Jersey Supreme Court, June 28, 2010

Facts: Plaintiff Paragon Contractors, Inc. sued defendant Peachtree Condominium Association for payment for construction work it performed on Peachtree's premises. Peachtree answered and counterclaimed for damages for Paragon's failure to properly complete drainage work at the site. Peachtree also filed a third-party complaint against Key Engineers, Inc., an entity that was hired to inspect and supervise Paragon's performance. With its third-party complaint, Peachtree filed a Case Information Statement which identified the matter as a construction case and did not respond to the question: "Is this a professional malpractice case?"

In its answer, Key raised the Affidavit of Merit statute as a separate defense. Further, in its Case Information Statement, Key characterized the case as one involving professional malpractice. Nevertheless, because the case originally was filed as a breach of contract action, the matter remained categorized by the civil case management staff as a construction case and was assigned to that track.

More than 120 days after Key filed its answer to Peachtree's third-party complaint and before Peachtree filed an affidavit of merit or a case management conference had been scheduled — Key filed a motion to dismiss the third-party action on the basis that Peachtree had failed to provide a timely affidavit of merit. In defense, Peachtree argued that the failure to schedule a Ferreira conference tolled the time frames in the Affidavit of Merit statute.

The trial judge rejected that argument and dismissed Peachtree's third-party complaint and all cross-claims against Key. The Appellate Division affirmed and Peachtree appealed to the New Jersey Supreme Court.

Issue: Whether the failure to hold a conference pursuant to Ferreira v. Rancocas Orthopedic Associates, tolls the filing period provided in the Affidavit of Merit statute?

Ruling: No. The Supreme Court held that the lack of a Ferreira conference would have no effect on plaintiff's responsibility to file an Affidavit of Merit within 120 days of the date of defendant's answer in a professional negligence action:

[P]arties are presumed to know the law and are obliged to follow it...Further, our creation of a tickler system to remind attorneys and their clients about critical filing dates plainly cannot trump the [Affidavit of Merit Statute].

The Court recognized the "confusion" over the issue and afforded relief to Peachtree. It warned, however, that "lawyers and litigants should understand that, going forward, reliance on the scheduling of a Ferreira conference to avoid the strictures of the Affidavit of Merit statute is entirely unwarranted and will not serve to toll the statutory time frames".

Lesson:  The lack of a Ferreira conference will no longer be a successful defense to the failure to timely comply with NJ's Affidavit of Merit statute.

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 Hofstra Law School: Lawyer Malpractice Class #4

Read: Fortney & Johnson, Legal Malpractice Law, Chap. 3, pp. 51-78.

The lawyer's basic duties are enshrined in the Rules of Professional Conduct adopted by each state. But while violation of a rule may provide grounds for a disciplinary proceeding, it does not in itself provide the basis of a legal malpractice action--even though a breach of that rule may cause the plaintiff damage.

See, Baxt v. Liloia, 155 NJ 190 (1998)

Many of the following duties, however, are inherent in and fundamental to the standard of care applicable to the practice of law. These standards have been part of the practice of law even before rules of legal ethics were codified in our present days Rules of Professional Conduct. So, alleging a breach of any of the  standards of practice which also might appear as a Rule of Professional Conduct, will usually suffice to sustain a malpractice claim.  

That being the case, do decisions such as Baxt v. Liloia have some  other rationale for holding that alleging a violation of a Rule of Professional Conduct cannot sustain a claim of legal malpractice ?

 Referring to the Rules of Professional Conduct is just a short cut for understanding what the lawyer's basic duties are. Actually, each of the duties are much broader than the language that the Rules imply. We'll see the true parameters of each of the duties--and how they frequently overlap with one another, in the court decisions relating to each of the duties. 

 Albright v. Burns, 206 N.J. Super 625, 634 (App. Div. 2001):

While violations of ethical standards do not per se give rise to tortious claims, the standards tet the minimum level of competency which must be displayed by all attorneys....Where an attorney fails to meet the minimum standard of competence governing the profession, such failure can be considered evidence of negligence. [citations omitted]

 Gilles v. Wiley, Malehorn & Sirota, 345 N.J. Super. 119, 125 (App. Div. 2001)

...violation of an RPC has essentially the same status and function in a malpractice action as a statute that prescribes a standard of conduct has in a negligence action.  Its breach is evidential of defendant's failure to comply with the required standard of care.

1. The Duty of Competence

ABA Model Rule 1.1 Competence

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. 

Compare with New Jersey's Rule:

NJ RPC 1.1: Competence

A lawyer shall not:

(a) Handle or neglect a matter entrusted to the lawyer in such manner that the lawyer's conduct constitutes gross negligence. 

(b) Exhibit a pattern of negligence or neglect in the lawyer's handling of legal matters generally. 

How do we define "competence" ?

NJ Advisory Committee on Professional Ethics Op. 671 (April 5, 1993)

• "a lawyer may accept representation where the requisite level of competence can be achieved by reasonable preparation" (ABA Model Rule 1.1., Comment)
• "includes inquiry into and analysis of the factual and legal elements of the problem"
• "To achieve and maintain the necessary levels of competence...the lawyer should engage in continuing legal study and education" (NJ Supreme Court, Comments to RPC 1.1).

Matter of Yetman, 113 N.J.556 (1989) (Duty to Refer a Matter to Other Counsel)

 2. The Duty of Diligence

RPC 1.3: Diligence

A lawyer shall act with reasonable diligence and promptness in representing a client. 

Restatement of the Law Governing Lawyers § 52 : "...a lawyer who owes a duty of care must exercise the competence and diligence normally exercised by lawyer in similar circumstances..."

Comment c. Diligence.  

A lawyer must devote reasonable diligence to a representation.  The lawyer must perform tasks reasonably appropriate to the representation, including, where appropriate, inquiry into facts, analysis of law, exercise of professional judgment, communication with the client, rendering of practical and ethical advice and drafting of documents.  What kind and extent of effort is appropriate depends on factors such as the scope of the representation..., the client's instructions..., the importance of the matter to the client...the cost of the effort, customary practice, and the time available. A lawyer who informs a client that the lawyer will undertake a specifically described activity is required to do so , as is one properly instructed by a client to take a particular step... Circumstances might make it necessary to provide more than one lawyer for a client's matter or to provide appropriate supervision of subordinate lawyers...or certain corresponding counsel.  When paralegal or other nonlawyers are used, they must be properly supervised. 

Diligence in litigation matters:

Olds v. Donnelly, 291 N.J. Super. 222 (App. Div. 1996) aff''d 150 NJ 424 (1997). 

Watts v. Camaligan, 344 N.J. Super. 453 (App. Div. 2001)

In re Brown, 967 So.2d 482 (La. 2007) (failure to diligently pursue personal injury action) 

Diligence in transactional matters:

Davin, LLC v. Daham, 329 N.J.Super 54, 71-72 (App. Div. 2000) (real estate lawyer)

Matter of Loomos, 90 Wash. 2d 98, 579 P.2d 350 (1978) (failure to complete probate of estate) 

3. The Duty to Investigate

Brizak v. Needle, 239 N.J. Super.415, 517 A.2d 975 (App.Div. 1990)  (personal injury lawyers)

Helmbrecht v. St. Paul Ins. Co., 362 N.W. 2d 118 (Wis. 1985)  (divorce lawyers)

Strickland v. Washington, 466 U.S. 668 (1984)  (criminal defense lawyers)

4. The Duty to Communicate

Communicate: (verb) to inform, advise, apprise, notify, give one to understand; explain; confer, disclose, reveal, consult, convey...

 RPC 1.4: Communication

(b) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information. 

(c)  A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation 

Restatement of Law Governing Lawyers [emphasis added]

§ 20: A Lawyer's Duty to Inform and Consult with a Client

(1) A lawyer must keep a client reasonably informed about the matter and must consult with a client to a reasonable extent concerning decision to be made by the lawyer under §§21-23.  

(2) A lawyer must promptly comply with a client's reasonable requests for information.

(3) A lawyer must notify a client of decision to be made by the client under §§21-23 and must explain a matter to the extent reasonably necessary to permit the client to make informed decision regarding the representation. 

Builders Square v. Saraco, 868 F. Supp. 748 (ED Pa. 1994) (duty to communicate settlement offers)

Conklin v. Hannoch Weisman, 145 N.J. 395 (1996)  (duty to explain effect of a mortgage subordination to an unsophisticated seller of real estate).

NJ Advisory Committee on Professional Ethics Op. #684 (3-9-98) (duty to advise client when you may have committed legal malpractice)

Please let us know your thoughts. Post a comment, or two, on any of the cases. Just click the Comment button. 

Prof W.  

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Benaquista v. Burke, Supreme Court of New York, Appellate Division, Third Department, June 10, 2010

Facts: Plaintiff and his mother co-owned various corporations and the Defendant attorney represented the corporation in various matters. In December 2002, Plaintiff's mother and corporate entities commenced a suit against Plaintiff for misappropriation of corporate funds. Defendant represented the mother and corporate entities against the Plaintiff in this underlying litigation. Plaintiff subsequently commenced this legal malpractice action alleging that he had utilized the Defendant's services concerning business issues with his mother, and in doing so, had revealed confidential information. Plaintiff further alleged that he had suffered damages as a result of the Defendant's decision to utilize the confidential information to institute the underlying lawsuit.
Defendant moved for summary judgment prior to the end of discovery, and argued that Plaintiff's complaint failed to state a cause of action for legal malpractice.

Issue: Is summary judgment for failure to state a claim appropriate in legal malpractice actions prior to the close of discovery?

Ruling: Yes. Defendant met this burden by proffering a sworn affidavit, alleging that his firm had represented plaintiff's mother and the corporations prior to his representation of plaintiff — which consisted only of the incorporation of a business owned by plaintiff — and that no conflict of interest existed. In addition, the plaintiff's bill of particulars failed to specifically identify any personal or confidential information used by the defendant against plaintiff or any damages suffered by plaintiff. Plaintiff's only opposition to defendant's cross motion was an attorney affirmation and various documents which consisted primarily of billing records:

Inasmuch as plaintiff failed to proffer any sworn allegations of an individual with personal knowledge of the relevant facts and the documents submitted were not in admissible form, his opposition was insufficient to sustain his burden of raising a triable issue of fact to defeat defendant's entitlement to judgment as a matter of law.

Accordingly, Supreme Court of New York, Appellate Division, affirmed the trial court's summary judgment dismissing Plaintiff's legal malpractice complaint.

Lesson: In New York, a plaintiff will not be able to defeat a motion for summary judgment, or obtain discovery on a claim for legal malpractice, without pointing to a concrete issue of fact that remains undecided after consideration of the parties' affidavits and other documentary evidence.

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 Hofstra Law School Class #5

Read: Fortney & Johnson, Legal Malpractice Law, Ch. 4, pp. 101-116; 421-424. 

Restatement of Law Governing Lawyers

§49. Breach of Fiduciary Duty--Generally

In addition to the other possible bases of civil liability described in §§48 [professional negligence] 55[breach of contract and equitable relief] and 56 [liability to a non-client], a lawyer is civilly liable to a client if the lawyer breaches a fiduciary duty to the client set forth in §16(3) and if that failure is a legal cause of injury with the meaning of §53, unless the lawyer has a defense within the meaning of §54. 

 

§16  Lawyer's Duties to a Client--Generally

To the extent consistent with the lawyer's other legal duties and subject to other provisions of this Restatement, a lawyer must, in matters within the scope of the representation:

(1) proceed in a manner reasonably calculated to advance a client's lawful objectives, as defined by the client after consultation;

(2) act with reasonable competence and diligence;

(3) comply with obligations concerning the client's confidences and property, avoid impermissible conflicting interests, deal honestly with the client, and not employ advantages arising from the client-lawyer relationship in a manner adverse to the client; 

(4) fulfill valid contractual obligations to the client. 

The Lawyer's Fiduciary Duties: "The 4 C's":

 1. Communicate

RLGL  §20 A Lawyer's Duty to Inform and Consult with a Client

(1) A lawyer must keep a client reasonably informed about the matter and must consult with a client to a reasonable extent concerning decisions to be made by the lawyer... 

(2) A lawyer must promptly comply with a client's reasonable requests for information. 

(3) A lawyer must notify a client of decisions to be made by the client...and must explain a matter to the extent reasonably necessary to permit the client to make informed decision regarding the representation. 

 * * *

RPC 1.4 Communication

(b) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.

(c) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decision regarding the representattion. 

 

Rizzo v. Haines, 555 A.2d 58 (Pa. 1989). (duty to disclose settlement offers to client)

FDIC v. Clark, 978 F.2d 1541 (10th Cir.1992) (duty to inform board of directors of a corporate officer's fraud).

2. Conflict Avoidance (duty of loyalty)

Maritrans v. Pepper Hamilton & Scheetz, 529 Pa. 241, 602 A.2d 1277 (1992)

Matter of Silverman, 113 NJ 198 (1988) (doing business with clients)

3. Confidentiality

Profit Sharing Trust v. Lampf Lipkind, 267 NJ Super 174 (Law Div. 1993)

4. Competence

Starron v. Weinstein, 305 N.J.Super. 263, 701 A.2d 1325 

Various courts have used other terms synonymous or encompassed by the "4 C's" to describe the fiduciary duty, or at least, the context within which various allegations of the breach of fiduciary duty has arisen. You should be familiar with these terms and recognize them as examples of breaches of the fiduciary duty:  "self-dealing"; "failure to exercise independent professional judgment"; "duty of loyalty"; "duty of candor"; "abuse of a position of trust"; "putting the interests of the lawyer ahead of the clients"; "misuse or abuse of client's confidential information". 

Here's a question to consider: If a lawyer overcharges a client, are there any circumstances where could be considered a breach of fiduciary duty?  I'd like to hear your thoughts on this. 

Share your comments, questions and input.  Just click the "Comment" button.

Prof. W. 

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 Hofstra Law School Class #6 & 7

(Updated Jan. 8, 2012)

Remember the Savings Bank v. Ward decision from Class #1? That case stands for the proposition that there must be a contractual relationship or "privity" between client and a lawyer before the client can sue the lawyer for malpractice.  In other words, no one outside of the client-lawyer relationship can sue. That stringent ruled prevailed in most states, and the only exceptions to the privity bar was fraud and collusion. But the privity barrier in legal malpractice cases has fallen, to a lesser or greater degree,  in most jurisdictions.   Some states have banished privity entirely. Most have modified it in various ways. What seems to have  developed is something of a spectrum along which the states line up between two poles  which might  be called "pro-privity" and  "anti-privity".  There are plenty of in between, which seem to vassilate between those two extremes.  During the course of the next two classes, we'll see how in the words of Judge Cardozo, in Ultramares Corp. v. Touche, 255 N.Y. 170, 180,  174 N.E. 441, 445 (1931) the "assault upon the citadel of privity" has progressed  to the point where it almost seems that our adversary system of justice has been turned on its head. More on that to come...

Let's see where we are today and how and why over the years the "citadel of privity" that once immunized lawyers from liability  has gradually, but most assuredly,  fallen piece by piece. 

Restatement of Law Governing Lawyers

§ 15.  A Lawyer's Duties to a Prospective Client

§ 51.  Duty of Care to Certain Nonclients

The Traditional Rule

Buckley v. Gray, 110 Cal. 339, 42 P.900 (1895) 

The traditional exceptions to privity: fraud and collusion

 The Assualt on Privity Begins

The Balancing of Factors Test

Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958)

Lucas v. Hamm, 56 Cal. 2d 583, 364 P. 2d 685 (1962)

Heyer v. Flaig, 70 Cal. 2d 223, 449 P.2d 161 (1969)

Third Party "Beneficiaries"

New York:       Prudential Insurance Co. v. Dewey Ballantine, 80 NY2d 377 (1992)

New Jersey:    Banco Popular, N.A. v. Gandhi, 184 N.J. 161 (2005)

Duties to Adversaries

New Jersey:   Petrillo v. Bachenberg, 139 N.J. 472 (1995)

New Jersey:   Davin, LLC v. Daham, 329 N.J. Super54 (App.Div. 2000)

Overview: 

Martyn, S.R., "Accidental Clients" , 33 Hofstra L. Rev. 913 (2005)

Other Ways to Dodge the Privity Barrier

PA: Hedlund Mfg. Co. v. Weiser, Staper & Spivack 517 Pa.522 (1988)

NY: Oppel v. Empire Mutual Ins. Co. 517 F. Supp. 1305 (SDNY 1981)

NJ: Alcman Services Corp. v. Bullock 925 F. Supp. 252 (DNJ 1996)

As you can see, the bastion of privity, which has insulated lawyers from liability has taken some pretty hard hits. Do you think there's anything left of privity? Does it offer negligent lawyers refuge anymore?What do you think? Please let us know your thoughts. Post a comment or tow on any of the cases. Just click the Comment button. 

Prof. W. 

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 Sharmrock Lacrosse, Inc. v. Klehr Harrison Harvey Bransburg & Ellers, et al (NJ App Div. 6-14-2010)

NJ underlying loss of patent due to alleged attorney negligence.

The Appellate Division has now ruled, in a case of first impression, that although New Jersey's Affidavit of Merit Statute does not list a Law Firm as a "licensed person" against whom an Affidavit of Merit is required in a legal malpractice suit, the law firm entity is to be considered a "licensed person" within the meaning of the statute. 

The facts are complex, the Judges tried to limit their holding to the unique facts of the case, but the Court's message--or at least the lesson for the practitioner seems  clear: 

1) Get an Affidavit of Merit for all defendants in a legal malpractice action in New Jersey, regardless of whether the defendant is admitted in NJ or not. 

2) Include in the Affidavit of Merit the law firm, as an entity, even though the law firm is a non-New Jersey based law firm.

The entire decision is worth reading.  Just click the case name above. 

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O’Callaghan v. Weitzman, 436 A.2d 212 (Pa. Super. Ct., 1981)

PA Underlying Tort Action.

Student Contributor: Colleen Gaedcke

Facts: The plaintiffs, husband, wife and daughter, brought a fraud and legal malpractice action against the defendant resulting from the defendant’s representation of in a vehicular negligence accident. The defendant hired a colleague to handle the plaintiff’s case who in turn hired another attorney to institute the suit on the plaintiff’s behalf. By the time the attorney attempted to commence the action, the statute of limitations had run as for the two adult plaintiffs. The attorney alerted the defendant and his malpractice insurer as to his error. Without any authority to do so, the defendant negotiated with the attorney’s insurer and obtained a $9,000 settlement offer for the plaintiffs. The plaintiffs accepted the offer under the impression that the settlement was for the original automobile accident. The defendant deducted 40% contingent fee from the $9,000 and gave the plaintiffs a personal check for the remainder of the balance. When the plaintiffs learned the truth behind the settlement they brought this action against the defendant for fraud and legal malpractice.

Issue: Whether the lower court erred in granting the plaintiffs motion for a new trial on the issue of fraud?

Ruling: No. The plaintiff’s evidence was sufficient to warrant submission of the issues of fraud and damages to the jury.
1. “Fraud is composed of a misrepresentation fraudulently uttered with the intent to induce the action undertaken in reliance upon it to the damage of its victim..[and] the evidence must be sufficient to ‘enable the jury to come to a clear conviction, without hesitating, of the truth of the precise facts in issue’.”
2. The jury could come to a clear conclusion that the defendant defrauded the plaintiffs because the defendant failed to truthfully inform the plaintiff about the nature of the settlement in an effort to avoid being sued for malpractice.
3. Furthermore, as a result of the defendant’s actions the plaintiff was denied the opportunity to have a disinterested advocate pursue a malpractice claim against the attorney for missing the statute of limitations.

Lesson: A deliberate nondisclosure by a lawyer of a material will amount to fraud and legal malpractice for which the client can sue the lawyer.

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Bolte v. Joy, 150 Wis.2d 744,443 N.W.2d 23(Ct. App. 1989)

Wis. underlying insurance claim

Student contributor: Cheryl Neuman

Facts: Plaintiff owned a building that was destroyed by fire and retained defendant attorney to represent him in an action against his insurance company with respect to the fire. A jury found that plaintiff had set fire to the building, causing the destruction. Plaintiff alleges that defendant was negligent because he didn’t discover in pretrial discovery that an eyewitness to the fire had given a description of the man seen running from the burning building that clearly excluded plaintiff as that man. Plaintiff claims that he was damaged in his business and professional reputation, suffered mental distress and anguish and that he also suffered from an impaired earning capacity. The trial court granted defendant’s motion for summary judgment because the complaints of the alleged injuries were too remote from the defendant’s negligence and were wholly disproportionate with defendant’s culpability.

Issue: Is defendant liable to plaintiff as a result of the alleged negligence?

Ruling: No. Despite defendant’s negligence, it is appropriate to dismiss this claim on grounds of public policy. Although plaintiff did suffer damages and a ruined reputation as a result of litigation, it would be unjust to award the plaintiff damages resulting from defendant’s negligence in this case. Liability does not always flow from a finding of negligence. The plaintiff set fire to his own building to collect insurance money, therefore precluding him from recovery against his attorney’s negligence, as a matter of public policy.

Lesson:

“The determination to not impose liability in instances where a negligent act has been committed and the act is a ‘substantial factor’ in causing the injury rests upon considerations of public policy.” Coffey v. Milwaukee, 74 Wis.2d 526 (Ct. App. 1976).

In this particular case, recovery was denied on grounds of public policy because:
1) The injury was too remote from the negligence
2) The injury is out of proportion to the culpability of the defendant
3) The recovery would place an unreasonable burden on the defendant , and
4) Recovery would enter a field that has no sensible or just stopping point.
If plaintiff would be allowed to succeed in this malpractice litigation, the door to “litigious flyspecking” would open wide, thereby producing a “chilling effect” upon lawyers to zealously represent their clients. Although the lawyer in this case was not held liable on grounds of public policy, it is always important to conduct proper pretrial discovery to avoid unnecessary litigation. 

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Yousian v. Eisenberg, 34 A.D.3d 228 (2006)

NY Underlying Medical Malpractice Action

Student Contributor: Ally Shuster

Facts: Plaintiff went to hospital complaining of gastrointestinal pain. Over the next few months, Plaintiff underwent a series of tests in order to diagnose his condition. He underwent a sonogram, the results of which showed that he had stones in his gallbladder. Subsequently, he underwent surgery and was left with debilitating pain that he alleges to be a result of the surgery. Plaintiff retained Defendants and sued for medical malpractice. The Defendant attorneys failed to timely re-calendar the case, which is the  basis for this legal malpractice claim.

Issue: Is there a valid legal malpractice claim?

Ruling: No. There is no issue of fact as to whether the treatment Plaintiff received at the Hospital constituted medical malpractice.

Lesson: In order to win a legal malpractice claim, a Plaintiff MUST prove that he could win the underlying case. Although it was troubling that Defendant attorneys failed to timely re-calendar the case, Plaintiff did not prove that he would have been successful in the underlying case but for the Defendant attorneys’ negligence.

“In order to prevail in a legal malpractice suit, the clients must prove that their former attorneys were negligent and that they could have prevailed and recovered a judgment but for that negligence.” Tanel v. Kreitzer & Vogelman, 293 A.D.2d 420
 

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Leder v. Spiegel  31 AD3d 266, aff'd 9 N.Y.3d 836, 872 N.E.2d 1194 N.Y., 2007

NY Underlying probate

Student Contributor: Ryan O'Donnell

Facts: Defendant represented plaintiff in an underlying probate matter. Rather than accept a settlement offer, plaintiff decided to continue at trial, where they were unsuccessful in challenging the will. The plaintiff bases his malpractice claim on defendant’s advice on the prospect of success in the underlying case, and that he would have accepted the settlement were it not for his attorney’s advice. There was no documentary evidence that shows that plaintiff refused to settle strictly based on defendant’s advice.

Issue: Is an attorney liable for legal malpractice if he was not the proximate cause of the client’s damages, even if he negligently represented his client?

Ruling: No.

"In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence"

The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent. Since there was no evidence that the defendant’s advice was the sole basis for refusing the settlement, the defendant was not the proximate cause of the plaintiff’s loss, the defendant attorney was not liable for malpractice.

The Lesson: Even an attorney who negligently represents his client will not be liable for malpractice if he is not the “but for” cause of the client’s damages. To establish liability based on the loss of a settlement opportunity, the plaintiff must prove that but for the attorney’s negligence he would have accepted the settlement offer. A court will not rely on bare allegations of fact by a plaintiff without documentary evidence to prove proximate cause.

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Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (A.D. 3 Dept., 2008).

NY: Litigation, Duty to Investigate

Student Contributor: Ryan O'Donnell

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client.

The Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry. 

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Erdman v. Dell 50 A.D.3d 627, 854 N.Y.S.2d 755 N.Y.A.D. 2 Dept., 2008.

NY Undelrying personal injury; worksite accident; scaffolding

Student Contributor: Ryan O'Donnell

Facts: Client filed a legal malpractice suit against attorney arising out of the attorney’s representation of client in an underlying NY Labor Law  § 240 (1) action. Plaintiff was injured while working on a scaffold doing pipe work in a building at 100 Broadway. Defendant’s mistaken brought an action against the owners of the building at 100 Pine street. By the time the mistake was realized, the statute of limitations had already expired. There was some questions as to whether the plaintiff had followed certain safety precautions that may have helped avoid the accident, and whether plaintiff had secured safety locks on the wheels of the scaffolding that may have prevented the accident.

Issue: Is an attorney liable for malpractice if he is not the proximate cause of the plaintiff’s damages, even if the attorney negligently allowed for the statute of limitations to expire?

Ruling: No. "In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney 'failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages" An attorney is not liable for damages to his client if he was not the proximate cause of those damages. Since there were questionable issues of fact as to what the proximate cause of the accident was, the defendant’s conduct was not a proximate cause of plaintiff’s damages.

Lesson: Summary judgment for legal malpractice liability is precluded if there is a genuine issue of material facts of proximate cause in the underlying action. But  even if an attorney fails to name a proper party as a defendant and the  statute of limitations expires, the  attorney is not liable for malpractice if a plaintiff can not prove that but for the attorney’s failure to file a timely suit the client would have succeeded in the underlying cause of action.

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Dessel v. Dessel and Donohue,431 N.W.2d 359 (Sup. Ct. 1988).

Iowa underlying partnership dissolution

Student contributor: Cheryl Neuman

Facts: Two brothers, James and George, were partners in a business and wanted to dissolve the partnership. Both brothers retained one lawyer, the defendant in the present action. The agreement stated that James’ share of the partnership would be sold to George and the accounts receivable would be divided equally between the two brothers.   After the partnership was dissolved, James died. James’ wife was appointed executor of the estate and she also retained defendant attorney as her attorney. James’ wife and George got into an argument regarding the division of the accounts receivable. Defendant counseled both George and James’ wife during the dispute. After the dispute could not be resolved, defendant, acting for the estate, sued George, claiming he breached his fiduciary duties in collecting the accounts receivable. George retained separate counsel and filed a legal malpractice case against defendant.

Issue 1: Was defendant liable for inserting a “hold harmless clause” in the dissolution agreement, as it was the sole basis for James’ wife’s suit against George?

Ruling 1: Yes, because this specific provision was inserted by mistake and in direct violation of the brother’s wishes and instructions. Defendant was therefore negligent.

Issue 2: Did defendant attorney have a conflict of interest in representing both George and James’ wife?

Ruling 2: Yes, because George stopped taking the 6% fee that James and George had orally agreed upon as a result of defendant’s advice. Defendant would not have given this advice had he not been retained to represent James’ wife. Furthermore, defendant’s negligence in inserting this clause, proximately caused George to pay legal expenses to defend the estate’s suit against him. Defendant’s advice to George was clearly the reason George surrendered the commission he had earned.

Lesson: A lawyer should not represent two parties in a matter when there is a clear conflict. There was information in this case that defendant questioned George about his activities and then used that information as the basis for the lawsuit against George; a clear violation of the professional rules of conduct. Rather than trying to retain the most amount of clients for the most amount of profit, it is wise to only represent those parties that are proper to represent and steer clear of malpractice litigation.  

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Rice v. Forestier,  414 S.W.2d 711 (Civ. App. 1967)

TX. underlying bankruptcy proceeding

Student contributor: Cheryl Neuman

Facts: Plaintiff retained defendant attorney for various matters, both in business and personally. Plaintiff suffered damages as a result of a default judgment filed against him in a bankruptcy proceeding. The plaintiff was served with citations. There is conflicting testimony regarding whether plaintiff delivered the citations (from the underlying cause of action) to the defendant’s office. Nevertheless, defendant was aware that the citations were in his office and defendant’s secretary actually prepared answers to the citations but was told not to file them because the business was in bankruptcy. The secretary placed the documents in a file and stored them away. These documents were then given to another attorney hired by plaintiff, in another matter. The new attorney testified that he received two citations from defendant’s file.

Issue: Whether defendant had a duty to inform plaintiff that he was not going to file an answer on plaintiff’s behalf?

Ruling: Yes. Since defendant knew that the citations were in his possession, he was obligated to inform plaintiff that he decided not to answer the citations. Defendant did, however, have the right to decline representation in this matter, but should have told plaintiff of his decision. The failure of the defendant to file the answer on plaintiff’s behalf and notify plaintiff that he would not be representing him was the proximate cause of the monetary loss as a result of the default judgment taken against him.

Lesson: A lawyer is free to choose his clients, but if the lawyer decides not to represent a longstanding client in a subsequent matter, it is prudent to inform the longstanding client of this decision. This is especially true, because, as seen in this case, a lawyer can be held liable to a client who he doesn’t inform that he will not be representing him.

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In re Estate of Remsen, 99 Misc. 2d 92 (N.Y. Sur. Ct. 1979)

NY Underlying Will Transaction

Student Contributor: Melissa Goldberg

Facts: Decedent died leaving a last will and testament in which she distributed her residuary estate in equal shares to her two sisters, the Plaintiffs and to eight nieces and nephews and one relative by marriage. Plaintiffs retained an attorney whose firm had represented the decedent's family for a long period. His duties were to represent them in the administration of this estate, including probate of decedent's will, preparing and filing tax proceedings and terminating the estate by formal or informal means, depending upon the agreement of the parties. For more than eight months, no action was taken to probate the decedent's will. The present proceeding to determine the fee of the former attorney, after his dismissal by Plaintiffs as their attorney, when he apparently refused or was otherwise unable to represent them at the scheduled title closing in the sale of the decedent's residence. Plaintiffs claimed that their former attorney unduly delayed the probate of the decedent's will, delayed the payment of the funeral expenses and other debts, and taxes and caused the loss of interest income.

Issue: Were the Plaintiffs correct in raising the issue of their former attorney’s ability to provide prompt legal services in a proceeded to fix and determine attorney fees within Surrogate’s Court?

The Result: Plaintiffs of an estate acted properly in raising the issue of their former attorney's inability to provide prompt legal services in a proceeding to fix and determine the attorney's fees as their failure to raise the issue at this proceeding might bar a subsequent malpractice claim.

The Lesson: The jurisdiction of the Surrogate’s Court is not so limited that it cannot determine the issues of malpractice of an attorney whose services and competence are relied upon by a lay fiduciary in the administration of an estate.

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Natl. Union Fire Ins. Co. of Pittsburgh, PA v. Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601

Underlying Action: Insurance (Ohio)

Student Contributor: Candice L. Deaner

Facts: The plaintiff retained a law firm’s partner, Wuerth, to defend them against a lawsuit. During the trial, Wuerth informed partners and the trial judge that he was sick and subsequently was taken to the hospital. His doctor advised the court that Wuerth was not capable of continuing with the trial. His firm filed an unsuccessful motion for a mistrial, then assigned attorneys to complete the trial. Plaintiff lost the trial and filed suit claiming that Wuerth had committed legal malpractice, that his firm was vicariously liable for Wuerth’s malpractice, and that the firm itself committed malpractice. While Plaintiff alleged wrongful acts by the firm, Wuerth was the only individual named as a defendant in the complaint. On a motion for summary judgment, the district court dismissed Wuerth from the action because Plaintiff had filed its complaint after the expiration of the one-year statute of limitations under Ohio law. Because the statute barred them against Wuerth, the district court also dismissed claims for vicarious liability against firm. Finally, the district court determined that the firm cannot be held directly liable for legal malpractice because it is not an attorney and does not practice law and Plaintiff appealed.

Issue: Can a legal malpractice claim be maintained directly against a law firm when all of the relevant employees have either been dismissed from the lawsuit or were never sued in the first instance?

The Ruling: The Supreme Court of Ohio held a law firm is vicariously liable only when one or more of its principals or associates are liable for legal malpractice:

 “Although a party injured by an agent may sue the principal, the agent, or both, a principal is vicariously liable only when an agent could be held directly liable the liability for the tortuous conduct flows through the agent by virtue of the agency relationship to the principal. If there is no liability assigned to the agent, it logically follows that there can be no liability imposed upon the principal for the agent’s actions.”

The Lesson: A law firm as an entity does not engage in the practice of law and therefore cannot commit legal malpractice directly. A law firm cannot be vicariously liable for legal malpractice unless one of its principals or associate attorneys is found liable for malpractice.

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Montes v. Rosenzweig, 21 A.D.3d 460, 800 N.Y.S.2d 444 (N.Y. App. Div. 2005)

NY Underlying Litigation: Wrongful Death and Negligence

Student Contributor: John Anzalone

Facts: Decedent retained Defendant Attorney to represent her in her claim against a building owner after she was injured by a faulty elevator. Decedent shortly thereafter died from complications from her injuries before an action was commenced against the building owner. Defendant brought suit on her estate's behalf, but failed to get letters of administration. Consequently, the suit was dismissed for lack of standing. After failing in his attempts to obtain letters of administration, Defendant told Plaintiffs that he was withdrawing and that the action had been dismissed. However, Defendant continued to represent the Plaintiffs in their attempts to get letters of administration so that they could sue the building owner. Defendant later told Plaintiffs that a suit against the building owner had become practically impossible to maintain because the statute of limitations that had run several years earlier. Plaintiffs sued Defendant Attorney. The case was dismissed based on time bar and failure to state a cause of action.

Issue: Was the statute of limitations tolled by the "continuous representation doctrine?"

The Ruling: In reversing the lower court, the Appellate Division held that the "continuous representation doctrine" tolled the statute of limitations, based on the following considerations:
1) The "continuous representation doctrine" tolls the three year statue of limitations doctrine period in the matter in which the alleged malpractice occurred.
2) The doctrine is triggered when there is a "continuing attorney-client relationship" after the malpractice occurs.
3) Here, the defendant continued to represent the Plaintiffs after first failing to obtains letters of administration to bring the negligence and wrongful death suits,
4) The alleged malpractice occurred because Defendant failed to obtain letters of administration before both statue of limitations expired.
5) After the malpractice occurred, Defendant allegedly led the plaintiffs to believe that a suit could still be filed against building owner if the letters of administration were obtained.
6) The Defendant did not inform the plaintiffs until well after the statute of limitations against the attorney had run that it was practically impossible from the Plaintiffs to sue the building owner.

The Lesson: Although the statute of limitations may have run for a malpractice claim against an attorney, that period may be tolled if the Attorney continually represents the plaintiff during the period after the cause of action accrues.
 

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Boomer v. Gross, 34 A.D.3d 1096, 825 N.Y.S.2d 171 (N.Y. App. Div. 2006)

NY Underlying Criminal Defense

Student Contributor: John Anzalone

Facts: Defendant attorney was paid by Plaintiff's stepfather to help file a motion on behalf of criminal defendant Plaintiff. Defendant concluded that the motion he was asked to help file would be frivolous and offered to refund "some or all" of the payments made to him. Plaintiff was convicted of several crimes including attempted murder. Plaintiff' brought a legal malpractice suit against Defendant that was dismissed.

Issue: Can the Plaintiff sue an Attorney who did not represent him at trial for legal malpractice in a criminal case if his conviction has not been overturned?

The Ruling: In affirming the lower courts grant of summary judgment for Defendant, the Court held that Plaintiff could not sue the attorney, based on the following considerations:
1) It is a "well-settled principle" that criminal defendants cannot sue attorneys for legal malpractice in their criminal cases if they were found guilty and that determination was not subsequently disturbed.
2) This principle is applicable to attorneys who represent the defendants at the criminal trial and those that represent the defendants solely outside of the court room.

The Lesson: The undisturbed determination of the plaintiff's guilt is a complete defense to a claim for legal malpractice in a criminal case. These plaintiffs cannot sue their attorneys for malpractice. This applies to all attorneys who do work for criminal defendants and is not limited to their trial attorneys.
 

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Waggoner v. Caruso, 2009 NY Slip Op 6739 (1st Dept. Sep. 29, 2009)

Underlying Commerical Matter

Facts:  Plaintiff Waggoner retained Attorney Caruso to trace and attach the assets of Suisse Security Bank and Trust ("SSBT") and British Trade and Commerce Bank ("BTBC") in an effort to recover $10 million.  Caruso attached SSBT's property to the extent of $3 million.  He asked Waggoner, however, to sign an affidavit stating that he had recovered approximately $7.7 million.  In the meantime, BTBC's chairman, Rodolfo Requena, pleaded guilty to federal money laundering charges and Caruso, allegedly, agreed to represent Requena without disclosure to Waggoner.  Waggoner subsequently filed a suit for legal malpractice, fraud, breach of fiduciary duty, fraud, and conspiracy to commit fraud against Caruso, his firm, and his previous employer, Pillsbury Winthrop ("Pillsbury").        

Pillsbury argued that Waggoner's claim for legal malpractice was time-barred, since their representation had terminated more than three years prior to the date the malpractice suit was instituted.

Issue:  Can a former client bring a suit for malpractice against a firm more than three years after the firm's representation has been terminated, in the event the client continues to be represented in the same matter by an attorney previously employed at the firm? 

Ruling:  Yes.  In New York, a legal malpractice action must be commenced within three years of accrual.  Accrual occurs when the malpractice is committed. A client, however, "cannot be expected to jeopardize a pending case or relationship with an attorney during the period that the attorney continues to handle the case".  Since "an attorney-client relationship would certainly be jeopardized by a client's allegation that his or her attorney committed malpractice", the statute is tolled as to a malpractice claim against a law firm where the attorney who handled the case continues to represent the client in the same matter. 

Lesson:  Under the "doctrine of continuous representation", the statute of limitations is tolled while representation on the same matter is ongoing by the same attorney at a new law firm.

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Joseph M. Guido, et al. v. Duane Morris, LLP, et al. (A-31-09)
Argued January 20, 2010 -- Decided June 3, 2010

RIVERA-SOTO, J., writing for a unanimous Court.

(Adapted From the Syllabus accompanying the Court's decision)

In this appeal the Court revisits the effect the settlement of an underlying lawsuit may have on a subsequent legal malpractice action arising out of that settled lawsuit.

FACTS: Plaintiff Joseph Guido was the majority shareholder and chairman of the board of directors of Allstates Worldcargo, Inc. (Allstates). In October 2004, plaintiff sued Allstates and several of its officers and directors, alleging certain corporate governance concerns. On October 27, 2004, the day before the return date on plaintiff’s order to show cause, James J. Ferreli, Esq., a lawyer with and a partner in defendant Duane Morris, LLP (the Law Firm), wrote to plaintiff advising, in part, “against any agreement…that includes as a term any limitation on [his] rights as majority shareholder of Allstates [.]” Ferrelli’s letter concluded by advising that should plaintiff settle, he
should “do so without undermining [his] ability and right as majority shareholder to change the board of directors, amend the By-Laws, or take other appropriate action, and that [he] take all steps to protect, to the greatest extent  possible, the value of [his] stock.”

The next day, the trial court denied plaintiff’s request for temporary restraints and referred the matter to mediation; the parties entered into a voluntary dismissal without prejudice, as provided in Rule 4:37-1(a); and entered into a settlement that was placed on the record. The parties, however, were unable to reduce the settlement terms to writing and, ultimately, Allstates “withdr[e]w [its] settlement proposal and elect[ed] to proceed with the litigation of this matter.” As a result, in February 2005, plaintiff filed a second suit against Allstates, again seeking injunctive relief. The trial court also referred that action to mediation, which ultimately resulted in the settlement plaintiff now claims was inadequate due to defendant’s failure to represent plaintiff in a competent manner. That settlement incorporates all of the items that caused concern to, and were counseled against by, Ferrelli in his letter to plaintiff. At a hearing held on April 5, 2005 where plaintiff was represented by Frank A. Luchak and Patricia Kane Williams, both of whom were lawyers from the Law Firm, the terms of the settlement were placed on the record.  Moreover, the trial court questioned the parties and was satisfied that there was “nothing that would impact [their] ability to understand the terms and accept responsibility for the terms.”   Almost two years later, on February 15, 2007, plaintiffs (Joseph Guido and his wife Teresa) filed their legal malpractice complaint against the Law Firm, Luchak and Williams, claiming that defendants “failed to exercise the knowledge, skill and ability ordinarily possessed and exercised by members of the legal profession similarly situated, and failed to employ reasonable care and prudence in connection with their representation of” plaintiffs. Defendants moved for summary judgment, pursuant to Rules 4:46-1 and -2. By a letter opinion and order dated June 11, 2008, the trial court entered summary judgment in favor of defendants and dismissed plaintiffs’ complaint with prejudice. Acknowledging that “there is a genuine issue of material fact as to whether or not the defendants adequately advised plaintiffs of the impact the voting agreement would have on the value of their shares, and whether or not the failure to do so constitutes legal malpractice[,]” the trial court, relying in part on Puder v. Buechel, 183 N.J. 428 (2005), nevertheless concluded that “a [p]laintiff must take reasonable steps to avoid the consequences of a former attorney’s tortious conduct before suing the attorney for malpractice.”

The trial court noted that plaintiffs “never sought to vacate or set aside the underlying settlement, nor did they take any reasonable steps to remedy the purported negligence of their attorneys.” Believing that efforts to vacate a prior settlement are an indispensable condition precedent to an action which alleges that the prior settlement was the result of legal malpractice, the trial court granted defendants’ motion for summary judgment and dismissed plaintiffs’ complaint “in its entirety with prejudice[.]”

Plaintiffs moved for reconsideration. Based on Hernandez v. Baugh, 401 N.J. Super. 539 (App. Div. 2008), the trial court granted reconsideration, and vacated its earlier order. The trial court noted that it “had previously determined that because [p]laintiffs failed to vacate the settlement in the Chancery Division, this would prohibit the malpractice action against [d]efendants.” It defined the “issue [a]s whether or not the actions taken by [p]laintiff to avoid the malpractice action w[ere] reasonable and [p]laintiff rightly argues to the Court that an application to the Chancery Division to vacate the Order because the attorney was negligent would be without merit.” The trial court  agreed, declaring that,“[i]n fact, it would be an exercise in futility to do so.”

THE APPELLATE DIVISION

Defendants sought leave to appeal that interlocutory order, which was granted. In an unpublished opinion, the Appellate Division affirmed the trial court’s denial of summary judgment. As a threshold matter, the panel concluded that it was proper for the trial court to have considered and granted plaintiffs’ motion for reconsideration, in part because Hernandez v. Baugh was decided after the motion was filed. Addressing the substance of defendants’ summary judgment motion, the Appellate Division agreed with the trial court that there existed “a genuine issue of material fact as to whether or not the defendants adequately explained the long-term implications of the settlement to” plaintiffs. The Appellate Division distinguished Puder and determined that this case was more like  Ziegelheim v. Apollo, 128 N.J. 250 (1992), “at least with respect to the matters not clear from the terms of the settlement agreement.”  On the issue of whether plaintiffs’ failure to seek to vacate the settlement barred them from pursuing a malpractice action, the appellate panel concluded “plaintiffs had no reasonable expectation of success on a motion to set aside the General Equity settlement, and consequently had no obligation to make such an application.”

THE SUPREME COURT

The Supreme Court granted defendants’ motion for leave to appeal. In addition, the Court granted amicus curiae status to the Trial Attorneys of New Jersey (TANJ) and to the New Jersey State Bar Association (NJSBA).

HELD: When a client alleges that he entered into a settlement based on negligent advice from his lawyers, he need not first seek to vacate the settlement, but may proceed directly against those lawyers the plaintiff asserts provided the negligent advice that culminated in the settlement.

1. The standards for determining whether a client can maintain a legal malpractice action against a lawyer who counseled a settlement are set forth clearly in Ziegelheim v. Apollo, 128 N.J. 250 (1992). The court in Ziegelheim concluded that

“[t]he fact that a party received a settlement that was ‘fair and equitable’ does not mean necessarily that the party’s attorney was competent or that the party would not have received a more favorable settlement had the party’s incompetent attorney been competent.” Id. at 265.

When viewed in its proper context – that Puder, supra, represents not a new rule, but an equity-based exception to Ziegelheim’s general rule – the rule of decision  applicable here is clear: unless the malpractice plaintiff is to be equitably estopped from prosecuting his or her malpractice claim, the existence of a prior settlement is not a bar to the prosecution of a legal malpractice claim  arising from such settlement. Here, unlike in Puder, plaintiffs did not represent to the court that they were satisfied with the settlement, or that the settlement was fair and adequate. In addition, and provided that they are supported by sufficient credible evidence in the record, the Court is bound by the trial court’s finding of a genuine issue of material fact, a finding concurred in by the Appellate Division. In light of that finding, the Court perceives no principled basis to bar plaintiffs’ malpractice claim. In addition, although whether a malpractice plaintiff in fact has sought to vacate a prior settlement may be a relevant factor, the failure to do so cannot be, in and of itself, dispositive. No doubt, there may be circumstances in which a malpractice plaintiff’s failure to mitigate his or her damages by seeking to vacate the settlement that gives rise to the malpractice claim may be relevant. However, because that action logically cannot be a prerequisite for all malpractice claims based on a settlement, it also cannot rise to the level of a condition precedent to a malpractice suit. Because the equitable considerations that animated the Court’s decision in Puder are absent here, the Court applies Ziegelheim’s rule without exception and concludes – without intimating any view as to the merits of plaintiffs’ substantive claim – that the trial court and the Appellate Division correctly held that plaintiffs’ malpractice claim is not barred as a matter of law. 

The judgment of the Appellate Division is AFFIRMED, and the case is REMANDED to the trial court for further proceedings consistent with the principles to which the Court has adverted.

CHIEF JUSTICE RABNER and JUSTICES LONG, ALBIN, WALLACE, and HOENS join in
JUSTICE RIVERA-SOTO’s opinion. JUSTICE LaVECCHIA did not participate.
 

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Steinberg v. Schnapp, 2010 NY Slip Op 02991 (1st Dept. April 13, 2010)

Underlying Probate Matter

Facts: Steinberg and Schnapp, both attorneys practicing independently, undertook the representation of another attorney, Borstein. Borstein had retained Steinberg and Schnapp to represent him with respect to “all legal proceedings and asset administration concerning the wills, assets and estate of the late Isi Fischzang”. More specifically, Borstein’s retainer agreement provided that Steinberg was “the general counsel…with respect to all litigation proceedings concerning the wills, assets, and estate”.

Soon after the commencement of the representation, however, Steinberg instituted an action against Schnapp for quantum meruit and interference with an advantageous economic relationship. Essentially, Steinberg alleged that Schnapp fired him to shift the blame for delays in the probate action that upset Borstein.

Issue: Where two attorneys are retained by an executor, one as trial counsel and the other as “Of Counsel”, should “Of Counsel” be permitted to seek his fees from trial counsel?

Ruling: No. The Court resorted to principles of contract law to resolve Steinberg’s claim, and held that the written documents evidenced that Steinberg’s client was the estate, not Schnapp:

In this case Steinberg has sought to recover compensation for his services from a party who did not have any obligation to compensate him – his co-counsel – with whom he was clearly not in privity. There is not even a suggestion that the estate is an undisclosed principal, in which case liability might attach to Schnapp, under time-honored principles.

The Court further held that Steinberg’s claims would fail in any event, since “[a]s a general rule, where there is a contractual relationship between a lawyer and client, the client has the right to terminate the attorney-client relationship at any time with or without cause”:

At best, Steinberg is suggesting that Schnapp made an inaccurate statement about the quality of Steinberg’s work, which statement led Borstein to terminate the attorney relation, a relationship that is terminable at will, in any event. Such statements would be neither tortious nor criminal.

Lesson: An attorney cannot seek compensation for services rendered from co-counsel, even where co-counsel’s representations allegedly led the client to terminate the representation. A client can terminate the attorney-client relationship at will. The attorney can seek to recover compensation for his services only from his former client.

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Sayeh v. 66 Madison Ave. Apt. Corp., 2010 NY Slip Op 03844 (1st Dept. May 6, 2010)

Underlying Commercial Transaction

Facts: Plaintiff, an owner of seven apartments in a coop, sought to purchase an eighth unit. Plaintiff’s application to purchase the eight unit was disapproved by the coop board members, despite an exclusion in the proprietary lease for a stockholder-to-stockholder exemption from the requirements of board approval for assignment of shares. Plaintiff, subsequently, commenced an action for legal malpractice and intentional tort against the coop’s attorney, Silberman.

Issue: Was Silberman liable to Sayeh for alleged damages sustained by the coop’s wrongful disapproval of his application to purchase an additional unit?

Ruling: No. The Court dismissed Sayeh’s claim for legal malpractice against Silberman, since “there [was] no evidence of privity or near privity to support the imposition of [such] a claim”. The Court also dismissed the claim for intentional tort, since there was no evidence of “collusion, malice, or fraud to warrant the imposition of liability”.

Lesson: An attorney will not be held liable to a third-party with whom he has no attorney-client relationship, nor any reason to suspect that the third-party is relying on him for advice.

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Ryan v. Powers & Santola, LLP, 2010 NY Slip Op 03827 (3^rd Dept. May 6, 2010)

Underlying Personal Injury Action

Facts:  Plaintiff Ryan was struck on the head by highchair while dining at a restaurant.  He then retained Powers & Santola to represent him in a negligence action against the restaurant. 

In response to the defendants’ motion to compel production of a verified bill of particulars and responses to outstanding discovery demands, the trial court issued an order in the underlying action providing that the matter would be dismissed if Ryan failed to provide the outstanding discovery.  Although Ryan eventually served discovery responses, a number of responses required more specific answers.  The trial court, thereafter, extended the discovery schedule twice with a conditional order that the action would be dismissed if plaintiff continued to fail to provide responses.  Ryan failed to comply and the matter was in fact dismissed. 

Subsequently, Ryan commenced a legal malpractice action against Powers & Santola for “failing to follow court orders…consenting to conditional orders…and failing to move to vacate the dismissal order”.  Ryan moved for partial summary judgment on the issue of liability. 

Issue:  Is Ryan’s alleged failure to cooperate with counsel in preparing discovery responses a viable defense to his action for legal malpractice?

Ruling:  Yes.  The Court held that:

A claim of legal malpractice will be sustained if the plaintiff establishes…that [he] would have succeeded on the merits of the underlying action but for the attorney’s negligence…We agree…that the plaintiff’s conclusory assertions – that ‘but for’ defendants’ alleged negligence, they ‘would have been able to prosecute all causes of action to a successful outcome’ – failed to establish their prima facie entitlement to summary judgment…There are questions of fact as to whether plaintiff failed to cooperate with defendants in providing them with information and documents necessary for motion practice after the underlying action was dismissed.

Lesson: A former client’s failure to cooperate is a question of fact in assessing the liability of the attorney in a malpractice action.  Failure to cooperate, more likely than not, would prevent plaintiff from establishing that “but for” his former counsel’s malpractice, he would have prevailed in the underlying action.   

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